Don’t miss this opportunity!! It’s important to understand the POWER ACCOUNT - the HSA!
Many are aware but studies have shown that many are missing out on this powerful account that could significantly improve your finances now and for your future retirement.
Most financial advisors report that among the public, there is a lack of knowledge and understanding about this valuable account!
The HSA - Health Savings Account - is the MOST POWERFUL account available.
However, not everyone has access to the HSA. If you have access, it should probably be your number one funding priority. Everyone’s situation is different. If you have access to a retirement plan at your employer that provides a match, then contributing enough to get the full match is most likely a slightly higher priority, since it is “free money”. Then maximize your HSA contribution. Still more to save? Then max out your 401k contribution.
So how do you qualify - and why is it so great?
HSA lives alongside a “high deductible health plan” or HDHP. It must be “HSA Compatible”.
Once you have an “HSA Compatible HDHP”, you can now fund your HSA. If you don’t have access to an HSA compatible HDHP, then you will not be able to contribute.
An HSA - the only tax advantaged account with ALL three of the following tax advantages:
Contributions avoid taxes. Pre-tax contributions just like a 401k or IRA - save on current taxes.
Grows tax-free like all retirement accounts.
Distributions for health related expenses are tax free.Used for health care related expenses - no taxes on distributions!
It’s the only account with all three tax advantages.
If you can make it to retirement with say, $100k or more in your HSA, your retirement will be significantly enhanced. Your medical expenses in retirement are usually higher, and they are paid tax free from the HSA.
If you’re married and both of you have access to an HSA, you can (and should) both make contributions. If married your HSA can be used to pay your health expenses, or your spouse’s health expenses.
The HSA is also managed by you! This is important because you can decide the timing of your reimbursement. For example if you are early on in your HSA funding and the market is down, you want to invest and not spend your contributions to take advantage of investing into the low market. Later if you’ve paid a group of health costs not using the HSA, and the market has had a nice run up, that would be a good time to pay those expenses from the HSA. You are allowed to pay for medical expenses with non-HSA funds, save the receipts, and then reimburse yourself now, or later if you wish. Just save your receipts, paid by HSA or not, in case the IRS wants to audit you.
Let’s say you pass away with an HSA balance and have unpaid medical bills not covered by insurance or saved medical bills that were already paid outside with non HSA funds - your loved ones can submit those bills and get that cash out tax fee.